A hint for insurance companies insisting upon assignment agreements as a condition of settlement

Let me get to the point very quickly. If you are an insurer who insists upon an innocent claimant signing an assignment agreement before you will settle their claim, firms will issue proceedings against you.

Really? Is this true?

I succeeded with such an approach this week at a regional county court with a very sensible judge.

Facts: RTA impact with property. The driver’s identity was known and the vehicle insured. Claim was worth north of £50k. Driver was not the owner. In fact the driver was a bit naughty and has no money. The claim was therefore against the RTA insurer. The insurer refused to pay unless an assignment agreement was signed by the claimant. The claimant didn’t want to sign this. As parties were in deadlock we issued proceedings. Liability was admitted under the EC Rights Against insurers Regs and it went to a disposal hearing.

Hearing: the DJ awarded all of the claim pleaded. It was a relatively low value claim (in litigation terms) and the claim was handled by a qualified and experienced loss adjuster. On costs, the defendant argued they should receive theirs or no order as to costs. We naturally relied upon their conditions for settlement being unreasonable – our client would have to assign their rights and the wording of the agreement meant the defendant could use our client’s name, without our client having control of such proceedings.

Judge’s view: he was very angry with the defendant. He explained in clear terms to the defendant’s barrister that the message he should feed back to those instructing him was to do some research on the Road Traffic Act. He explained that the RTA insurer would have the ability to pursue the driver under section 151(8)(b) for the damages paid out by the insurer. Counsel, who had been handed a bad brief, was obliging and explained his instructions were that the assignment was an internal policy decision of the insurer. This only made the judge angry as he sat in the family and county court, and clearly had more important things to do than listen to a rich insurance company pushing an innocent claimant around.   The judge liked our argument about insurers insisting on a conditional settlement as being completely unreasonable as it exposed the claimant to 2 potential actions from the one incident. Sadly our request for indemnity costs was refused which was a bloody shame as I lost £10 on a bet with a colleague.

Why do insurers insist upon this?

Dunno.

I am aware of 2 insurers who frequently insist upon these for RTA claims. During w/p discussions their fee earners have admitted that it is very rare for the insurer to pursue a driver using an assignment agreement. This is because most people who are involved in these types of cases have no money (e.g. criminals, underage TWOC’ers, foreign drivers who return overseas without trace, etc).

I suspect a consultant has managed to convince the insurers that the assignment agreement provides them with extra ammunition. This is stupid as most motor policies will include an express section on their rights of recovery from settling a claim involving a third party, and the Road Traffic Act also gives them a statutory provision to reclaim the costs. This is also particularly silly in subrogated claims as a claimant would be giving 2 separate insurance companies a cause of action arising from the same incident!

What should claimants do?

Due to the infrequency of the insurer actually pursuing someone using the agreement, they can run the risk that the low chance is worthwhile “signing and taking the cash”.

However, if you are an innocent claimant and don’t ever want to revisit the matter again, simply sue the insurer.

Also importantly for claimants, this silly conduct by insurers is a great costs building exercise. You can have some back-and-forth over the assignment agreement, before issuing and dealing with their defence. Thereafter, you may even be able to get lucky with a summary judgment application and then the costs of preparing for a disposal hearing if it gets that far. You are unlikely to fail in your costs arguments where a conditional settlement is presented by an insurer.

 

Over and out.

Legal Orange.

Letter of Claim Guidance

I receive emails from people asking for free legal advice. This normally means taking on a pro bono case for them. I wish I could. But my firm doesn’t allow this, and I am not paid enough to subsidise others. Instead, the next best thing I can do is provide some free guidance.

Fundamentals before drafting a letter of claim.

(1) Identify if it is governed by a pre-action protocol (http://www.justice.gov.uk/courts/procedure-rules/civil/protocol)

(2) Read the protocol that applies. If your dispute does not fall within a protocol (which most contract disputes do not as most emails to me relate to contract law) then use the practice direction for pre-action conduct.

(3) Read the protocol/practice direction a further 2 times. Let it sink it. Remember, this is just the ADMINISTRATION of the claim. It does not determine who wins or loses; think of it as the guidance of how a claim should be handled by both sides.

Preparing the letter of claim

(1) Introduce the claim. Include key items such as:

  • identify of the claimant(s) and defendant(s)
  • date(s) of incident(s) allegedly giving rise to cause of action
  • explain the protocol/practice direction you intend to comply with
  • outline the timeframe for which you require compliance from the other side (e.g.acknowledgment within 14 days and substantive response within 28 days)
  • point out the other side should refer the matter to their insurance company if it will be relevant

(2) Highlight the key facts and evidence. This may include:

  • explanation of who the parties are (e.g. a consumer, a tradesman, a supplier, a manufacturer, a property owner, landlord, tenants, etc)
  • provide a brief factual background
  • explain the relevant facts that you are alleging happened (e.g. date of parties entering into a written contract)
  • put forward the evidence you have in support (e.g. copy of emails, written contracts, receipts, photographic evidence, expert evidence, independent third party witnesses such as an attending police officer)
  • as an aside, mention the loss and damage that has been suffered

(3) A section on liability must be outlined. This should explain:

  • why the claimant holds the defendant liable
  • the relevant EU law or statute that has been breached
  • any relevant secondary legislation that was breached (e.g. a statutory instrument)
  • allegations of non-statutory breaches such as negligence or nuisance
  • how or why the defendant is liable

(4) The quantum of the claim should be outlined. This should include reference to any enclosed documents such as invoices, estimates,quotes, etc. Make sure you mention if the claim has been finalised or other items are outstanding (e.g. ongoing building repairs)

(5) Include a section on documents. State the documents you rely upon in support of the claim and enclose them. Do not forget to state the documents you seek to be disclosed by the defendant (e.g. risk assessments, report logs, work orders, etc). Threaten a pre-action disclosure application if these are not disclosed voluntarily within a set timeframe.

(6) Outline your funding. If you are handling this yourself as a litigant in person then do not mention this. If however there is a CFA or you have taken out After-The-Event insurance this should be communicated to the defendant.

(7) Offer to settle the claim by way of Alternative Dispute Resolution before litigation. Protect yourself with including this as a separate section. Make it clear that you want to “do a deal” without going to Court. A simply offer to handle this by way of a without prejudice telephone discussion could be sufficient for a relatively low value claim. You don’t have to immediately run off to an expensive mediation.

(8) Provide an overview. Explain what you want from them such as compliance with the protocol/practice direction, or a meeting, or simply ask for a settlement cheque. Highlight that if liability is denied then you require a substantive response along with voluntary disclosure.

Once all of the above has been completed, sit back and wait for the response. You should read the protocol/practice direction again after you have received their response. I would recommend then taking your case to the local Citizen’s Advice Bureau if you are unable to afford to pay for a solicitor. They will be well placed to advise you further. This may include them telling you that your claim is doomed to fail, reasonable and needs to be presented better, or encourage you to litigate through a well-known pro bono or “CFA friendly” local solicitor.

Over and out.

Legal Orange.

The very easy decision in Blankley v Manchester NHS Trust [2015] EWCA Civ 18.

Was anybody surprised by the court’s decision in this case? (link: http://www.bailii.org/ew/cases/EWCA/Civ/2015/18.html)

I thought not.

Background summary

I have lifted the background from the judgment because (i) it is well drafted; and (ii) I am lazy:

On 6 August 1999 the claimant underwent a suction termination and laparoscopic sterilisation at St Mary’s Hospital, Manchester (part of the defendant Trust) which resulted in cardio-respiratory arrest and anoxic brain damage.

In July 2000 a legal aid certificate was granted to the claimant. On 5 August 2002 she issued proceedings in the County Court, claiming damages for the alleged negligence of the defendant in relation to the procedure. At that stage she was conducting the proceedings without a litigation friend. The firm of Linder Myers acted as her solicitors.

In December 2002 a consultant neuropsychiatrist concluded that the claimant lacked capacity, in consequence of which her father was appointed her litigation friend.

The proceedings were complex and contested but in February 2005 the parties reached agreement on liability and judgment was entered for the claimant for damages to be assessed on the basis of 95% liability.

By May 2005 the claimant was assessed to have regained mental capacity and an order was made that she carry on the proceedings without a litigation friend. On 7 July 2005 the legal aid certificate was discharged. The next day, 8 July 2005, the claimant entered into a CFA with Linder Myers. There is no dispute that the CFA was valid when executed.

The CFA was in a Law Society model form and was expressed to cover the claimant’s claim against the defendant (at that time, of course, limited to the issue of quantum), any appeal and any proceedings to enforce a judgment, order or agreement. It provided that if the claimant won her claim she would pay the firm’s basic charges, its disbursements and a success fee of 25%, and that she would be entitled to seek recovery of these costs from the defendant.

On about 9 February 2007 further psychiatric assessments of the claimant determined that she had once more lost the capacity to conduct her own affairs and could not provide instructions in relation to her ongoing claim. On 26 February 2007 an application was made to the Court of Protection for the appointment of Mr Cusworth, a trusts partner in Linder Myers, as the claimant’s receiver. On 16 April 2007 the Court of Protection duly made such an order, expressly providing that the receiver had authority to conduct the proceedings on the claimant’s behalf. On 1 October 2007, on the coming into force of section 66 of the Mental Capacity Act 2005, and by virtue of the transitional provisions in schedule 5 to that Act, receivers automatically became Court of Protection deputies. It was subsequently confirmed that Mr Cusworth, as such deputy, was entitled to act as a litigation friend of the claimant as of right.

On 16 July 2007 Mr Slater, a litigation solicitor at Linder Myers, sent a copy of the claimant’s CFA to Mr Cusworth’s assistant. On 4 September 2007 Mr Slater wrote to Mr Cusworth, stating “as you know we are proceeding with this case on a conditional fee basis” and providing an update on fees and rates. Mr Slater sent a similar client care letter to Mr Cusworth every six months thereafter, each stating that Linder Myers was proceeding on a conditional fee basis. At the end of his letter dated 26 February 2009 Mr Slater added a manuscript note asking Mr Cusworth “Do you feel that a new [CFA] is needed now that you have taken over conduct or do you just assume any contractual relationship that [the claimant] was already in?” It appears that a draft of a new CFA was prepared by Linder Myers in March 2009 but no-one was able to locate an executed version of that agreement.

What happened next?

The quantum proceedings eventually resulted in a settlement of the claim in the amount of £2.6 million plus costs, the settlement being approved by the court on 5 March 2010.

Linder Myers submitted a bill of costs on behalf of the claimant in the total sum of £387,724.42, including disbursements, subsequently amended to £372,724.42. The defendant disputed the parts of the bill that related to the period from March 2007 when the claimant was acting through Mr Cusworth as her receiver/deputy. The defendant’s contention was that the CFA had terminated automatically before that time as a result of the claimant’s incapacity, leaving Linder Myers without any retainer.

In two separate judgments, Regional Costs Judge DN Harris accepted the defendant’s contention and rejected a number of alternative bases on which it was argued on behalf of the claimant that Linder Myers’ fees were recoverable.

The appeal

As I have already linked to the decision and lazily copied-and-pasted most of it above, you will be now understand the appeal came down in its most basic form to frustration of contract, the ability of a third party to provide instructions on behalf of a client and incapacity.

The outcome?

Unsurprisingly the court ruled that the CFA was valid.

Now let us focus upon all of the above. There are some pertinent points to be made.

  1. This was an opportunistic defendant trying to be clever; and
  2. It was an attack on all innocent victims that rely on CFAs for access to justice.

The first limb was the defendant, or their costs counsel, getting terribly excited in an attempt to get around the intricacies of the law.  A caveat some would say if they were at law school. This happens in nearly every law office – there is talk of how one would like to run a defence on a certain angle, but it is too risky as the court may punish you for such audacity. On this occasion, they took a punt.

While there was some academic merit in the defendant’s approach, and their suave tongued barrister must have been very persuasive at first instance; they could not get away from the fact that the client had capacity at the time she entered into the CFA. I love the phrase used in the judgment of “fluctuating capacity” for its accuracy. When laying bare some of the fundamentals of contract law, the defendant faced an uphill battle because there was acceptance of capacity when the CFA was entered into.

The second limb is identical in its importance.

It would be absolutely unforgiveable for a defendant to benefit from a lack of capacity argument when it has been their actions which has caused or contributed towards the incapacity.

Road Traffic insurers and employers of healthcare professionals would rub their hands with glee if they could (i) injure a party [causing a lack of capacity some time in the future following the CFA] who is forced onto a CFA due to having limited funds, and (ii) then refuse to pay costs as the person they have injured lacked capacity at some stage.

Access to justice is a very important concept. The courts enjoy it. The government destroyed legal aid and CFAs provide injured claimants with an opportunity to instruct lawyers to represent them. It should be at the defendant’s cost as opposed to the claimant.

I will step down from my soapbox now. But seriously, the decision was easy to predict. We now just have the Coventry decision to follow suit in its predictability.

Over and out.

Legal Orange.

 

 

 

The impact that will be caused by the (proposed) increase in court fees.

In short, there will be minimal impact. The only winner is the government.

Why will there be little impact?

The wealthy will be unaffected by the sums of money that will be involved (it’s chickenfeed to them). The poor shall qualify for qualify for fee exemptions, so they will not share the pain.

Those neither rich or poor will be affected. But they do not make up the bulk of litigants.

HMCTS has not been coy about their reason for increasing the fees. They want to raise fee income.

What’s the problem?

The MOJ has omitted to mention that they have attached much excitement to the figures released from the employment tribunals.The government discovered that huge numbers of ET1 drafters decided not to use the employment tribunal when they introduced relatively expensive issue and final hearing fees.

This was great because the government is a huge employer facing large numbers of claims. The reduction was in their favour.

Increased court fees, in the eyes if the government, produce a deterrent towards litigation for the lower quartile of society. They know that fewer claims will save government costs. Furthermore they are alive to the rich being able to pay their way through increased court fees. It’s all about saving money. I discussed this with a DDJ who observed that their salaries and pensions have been increasing at glacial pace, so the money is not going to MOJ staff.

What will happen in reality?

The rich will continue unaffected by the change, as will the poor.

Firms on CFA’s will pay the increased court fees and essentially “sub” those in the middle (you know, those actually affected by this), so long as their case has reasonable prospects of success.

Some people will find they cannot afford it, but I imagine this category will not replicate the figures seen from the employment tribunal.

 

Over and out.

Legal Orange.

 

 

 

2015 predictions

Apologies for the hiatus.

2015 predictions are all the rage, and I lack the originality to come up with something different.

Without further delay:

1. Cost budgeting

The lower-end multi track will have fixed costs brought into effect.

Rumour is £250k, but maybe it will be less (say £100k?).

There is a general frustration when £40k claims are listed for costs and case management conferences that take up 90 minutes.

2. ATE funding changes

The return that ATE funders seek is in the region of 16-17 times the risk they accept.

People do not want to pay this level of premium out of their costs and damages. They will therefore come up with a cheaper product and a mass marketing scheme to deliver this.

3. The Coventry litigation

There is no chance of the senior court deciding that the government has to pay defendant insurers millions of pounds in rebates for allowing success fee uplifts.

Look forward to a beautifully worded judgment.

4. Damages Based Agreements

They will finally be amended for wider use.

It makes little sense to disallow a sophisticated consumer, such as a large bank or insurer, to enter into an agreement with their solicitors where a damages based agreement can be used.

On the lower end of the market, this is more difficult. The fine balance between “access to justice” and protection of a lay client means that I see the commercial clients leading the way with DBA’s.

5. A new portal

Expect to see something else enter a portal. I don’t want to say more than this in the event what I have been told is nonsense!

6. The next Halliwells

Mark my words, another large firm will go under.

Do not expect a forced merger, there will be asset stripping and the death of a fairly large top 25 firm.

Either the taxman or creditors will be the real reason. The excuse rolled out in the PR statement will blame the legal marketplace changes.

7. MLRO officers taking on even more control

The anti money laundering officers at some international firms are getting nervous as they are an unpaid state agent and expected to spot everything. The pressure upon them will only increase.

This is not a good thing with the increase in bad people around the world who are intent on death and destruction.

8. The Family Courts will fight back

There are some very strong judges in the family court.

Expect them to increasingly make orders from public funds to allow litigants access to Counsel or solicitors. Equality of arms will be a big thing this year. Legal aid cuts will gain more exposure from this court.

9. There will finally be a report on Alan Blacker

You know, the ‘Harry Potter’ chap with the badges, whose representation in a trial led to numerous articles and forum postings.

Will be interesting reading.

10. Chelsea will win the Premiership

But fall short in the Champions League

 

Over and out.

Legal Orange.

 

Year-end settlements

This time of year results in 2 different scenarios. There is no “third way”. Fee earners will face either:

1 – The Christmas winding down season; or

2 – Settlements before 31 December

1. Christmas countdown

This tends to be the old school relaxation time. Many hours are skived through late arrival, long boozy lunches, client meetings and early finishes.

Perfect.

2. Last minute settlements

These tend to reflect the increasing trend of the last 5 years.

As insurers and banks increase pressure, principally to “put to bed” long running matters so they fall into the financial year (subject to theirs ending 31/12), the final 3 weeks of December see parties resorting to a commercial approach.

Global offers raise their head more so than Part 36 offers, as people look to wrap up damages and costs. The game playing is sometimes fun when an opponent refuses to show the science behind their offer (“divvy it up however you want it”).

Hints and Tips

  • Work on Christmas eve.  Just the morning will do. 2 settlements in the morning is achievable
  • Use the telephone
  • The above is repeated for emphasis – do not mess around with letters or emails – pick up the phone!
  • Make sure you have standing instructions from your client; do not be afraid to hassle them if you need to get a set figure to use
  • If you cannot agree something there and then with your opponent, attempt to fix them with an “agreement in principle” to hold over while you track down a client
  • Agree with your managing partner a list of files you intend to target and settle before year-end
  • Make sure that you have a bottom line for costs on each file you want to settle in the event that a global offer is received (agree this with your partner and have a written record of this on file)
  • Deliver good news by telephone to your client if you achieve a good result for them- you never know if they will send a nice bottle of something your way in the spirit of Christmas (you will not receive any January gifts!!)
  • Make sure the experts you frequently instruct bribe you with foodand drink in early December, to avoid this interfering with your year-end files

If you have not already carried out the above hints and tips, make this your Monday morning task.

Over and out.

Legal Orange

How to settle on best terms

I do a lot of claimant work. A lot. Some blogs include references to tactics and costs building. It is only right that I seek to repent for these sins by explaining how defendants can GENUINELY settle on best terms.

Rule 1

“Settle on best terms” generally means “Settle this claim in the cheapest possible way”. Only on occasion will there be a reputation/brand issue to take into account as part of “best terms”. Rule 1 in this situation is therefore to treat your client’s money as if it is your own.

Rule 2

Repeat rule 1 to yourself (kind of like Fight Club…) This converts to rule 2 as being: achieving settlement in the cheapest possible way taking EVERYTHING into account.

Rule 3 (aka “what is everything to take into account”)

Remember that your client foots the bill for 3 things within their total reserve: (1) C’s damages; (2) C’s costs; and (3) D’s costs. Remind yourself of this again. Defendants frequently overlook the last section and incur ridiculous fees generated by taking silly points and/or investigating irrelevant matters.

Rule 4

Remember the aim is to try and cap claimants on damages and their costs. Do not run up £10,000 of extra defendant costs on chipping the claimant’s damages down by £5,000. In this time the claimant’s costs will probably also have increased by £2,500 in fighting out the damages argument. As referred to above, during this time your own bill of defendant costs will have also moved upwards. Is it worth it? No. Explain to your client that the claim may be overstated, however it is more economic to pay the additional damages to avoid the client paying out more overall.

Rule 5

This is a difficult one to stomach. It often pays to admit liability. Be blunt. If your client is on the hook then write an open letter to the defendant stating liability is admitted and you will not be paying them a single penny from that point onwards in relation to their time recording in respect of liability.

Claimants love nothing better than a caveated quasi-admission. Liability being admitted subject to causation just means the following to the claimant:

THEY WANT TO SETTLE SO LET’S RAMP OUR COSTS UP AS THEY HAVE NOT MADE A CLEAR ADMISSION.

A number of County Courts have granted pre-action disclosure applications to our clients on quasi-admissions. The defendant finds no favour in drawing their quasi-admission to the Court’s attention. My favourite was the DJ’s exchange with an opponent:

DJ – “Is liability admitted or not?”

Opponent – “It is subject to causation, Sir”

DJ – “No, Mr [name withheld], it is a yes or no answer. I expect a yes or no.”

Opponent – “Sir, I cannot say that it is, but that it is subject to causation”

DJ – “I read that as a no. The applicant will receive their causation documents and costs assessed at £1,500″

From the above you will realise that once liability is admitted, the defendant can take some control over the presentation of the claim by the claimant.

Rule 6

Demand the quantum evidence in a set manner. If you think that only invoices are needed without anything further then ask for this only. State in open correspondence that you expect to be served with these documents and refuse to pay for any other costs incurred by the claimant relating to quantum (e.g. witness evidence on this point, or an expert’s report on quantum).

Once you have assessed quantum, if it is not overstated then pay the claim. If only a marginal or nominal amount is overstated then consider whether it merits challenging the payment, as the claimant may incur a lot more money in instructing an expert or counsel. The claimant may be at risk of not recovering the disbursement of instructing an expert/counsel, however is it worth taking the risk if your client has to absorb this fee? That’s your call.

Remember that your fees will be incurred in considering and dealing with all of this. If you need witness evidence from the claimant then demand it only covers certain points. If the background is well made out then ask for it to address only set points only. If you need an expert to assess them, try to arrange it so the claimant only has to attend on their own and meet with your expert.

Rule 7

Invite details of C’s costs and make a well calculated global offer. Claimants will take early-money at a lower amount to avoid WIP lock-up and the costs of provisional or detailed assessment This is particularly useful if you know the year-end date of the claimant’s solicitors’ firm!

Over and out.

Legal Orange.